G.R. No. 144476 - Ong Yong vs. Tiu

First Landlink Asia Development Corporation (FLADC), owned solely by the Tiu family, was developing Masagana Citimall and faced foreclosure by PNB over a ₱190 M mortgage.
To avert foreclosure, the Tius invited the Ong family to invest under a Pre-Subscription Agreement dated August 15, 1994, providing for equal shareholdings in FLADC (1,000,000 shares each), nomination rights to corporate officers and directors, and management/control of the mall by the Ongs.

The Ongs subscribed to 1,000,000 FLADC shares at ₱100 par, paying ₱100 M in cash; they later advanced an additional ₱70 M to FLADC and ₱20 M directly to the Tius.
The Tius were to contribute property—four‐storey building (₱20 M, 200,000 shares), 1,902.30 sqm lot (₱30 M, 300,000 shares) and 151 sqm lot (₱49.8 M, 49,800 shares)—plus their existing 450,200 shares; total investments funded the full ₱190 M mortgage settlement.

February 23, 1996: The Tius unilaterally rescinded the Agreement, alleging the Ongs (a) refused to credit property‐based shares, (b) blocked David and Cely Tiu from officer duties, and (c) denied agreed executive office space.
Ongs’ defense: the Tius declined to perform officer functions, office space was eventually provided, and share issuance was prevented by the Tius’ failure to pay applicable transfer taxes; the 151 sqm lot was already corporate property.

SEC Hearing Officer (May 19, 1997): Confirmed rescission; ordered cancellation of Ongs’ 1 M‐share subscription, return of ₱170 M, surrender of FLADC titles, injunction on Ongs’ corporate acts, and payment of loan interest. Partial reconsideration classified the Ongs’ ₱70 M as a loan.
SEC En Banc (Sept 11, 1998): Affirmed rescission but treated ₱70 M as stock premium (no interest).
Court of Appeals (Oct 5, 1999): Affirmed rescission with modifications—ordered liquidation, distribution of contributions, payment of ₱70 M advance plus legal interest by FLADC, ₱20 M loan repayment by Tius with interest; criticized Tius for ingratitude and diversion of corporate funds.
Supreme Court Decision (Feb 1, 2002): Affirmed CA with modifications—awarded interest on loans, credited Tius with 49,800 shares; held both parties in pari delicto but rescission was the most practical remedy to avoid further squabbles.

March 15, 2002: The Ongs and Willie Ong filed motions for reconsideration/ modification, contesting rescission as remedy, distribution of mall assets, denial of interest and damages. The Tius moved for writ of execution, claiming finality of the SEC order and injury from delay.
Opposition: The Ongs argued the Decision was not final and executory; SEC retained jurisdiction. The Tius urged denial of motions as pro forma. Oral arguments and memoranda were submitted in January–February 2003.

Can the Tius, in their personal capacity, validly rescind the Pre-Subscription Agreement for breach?
Was rescission the proper and lawful remedy versus specific performance or other intra‐corporate remedies?
Does rescission contravene the Trust Fund Doctrine and the Corporation Code’s requirements for corporate dissolution or decrease of capital?
Does equity and fairness demand reversal of rescission and preservation of the Ongs’ and FLADC’s interests?